Paper: GS – III, Subject: Environment, Ecology and Disaster Management, Topic: Indian initiatives, efforts and commitments, Issue: Significance of India’s carbon credit trading scheme.
Context:
The Government of India announced GHG emissions intensity targets for eight industrial sectors under the Carbon Credit Trading Scheme (CCTS).
Key Highlights:
- Sectoral focus: Focus sectors under the scheme include Aluminium, Cement, Paper & Pulp, Chlor-alkali, Iron & Steel, Textile, Petrochemicals, and Refineries.
India’s PAT Scheme Experience (Perform, Achieve & Trade):
- Reduce consumption: PAT scheme helped energy-intensive industries reduce consumption through market mechanisms.
- Energy saving: Entities that saved energy could trade excess savings (energy certificates) with others.
- Mixed results: Some entities saw increased energy intensity, while others improved.
- Sector-level patterns: Decline in paper and chlor-alkali while increase in aluminium and cement.
- When adjusted for output and energy use, overall energy efficiency improved.
- It shows that market-based incentives can work, but doesn’t confirm whether targets were ambitious or business-as-usual.
Challenges with Sector-Level Focus:
- Distorted focus: Emissions trading focuses on the aggregate impact, not individual compliance.
- Diluted national targets: Sector/entity-level reductions though enable financial transfers; they don’t reflect national ambition.
- Underestimating ambition: Relying only on sectoral data may underestimate ambition if mitigation pathways are uneven.
- Limited scope: Ambition should be assessed at the economy-wide level, not at individual entity or sector levels.
- Macro matters: Reductions at the macro level (national level) matter more in an emissions trading framework.
- Limited ambition: Current Carbon Credit Trading Scheme (CCTS) targets may not be ambitious enough. Sector-specific targets cannot be directly compared to India’s economy-wide NDC targets (e.g., 2070 net-zero).
- Emissions Intensity Projections:
- CO₂ intensity of India’s energy sector is projected to decline by 3.44% annually (2025–2030).
- Manufacturing sector under Carbon Credit Trading Scheme (CCTS): Manufacturing sector emissions are projected to decline by 2.53% annually.
- Estimated average industrial emissions intensity reduction under Carbon Credit Trading Scheme (CCTS): 1.68% annually (2023–2030).
Conclusion:
- Wider assessments: Economy-wide assessments offer the most accurate benchmark for ambition under carbon markets.
- Detailed modelling: Need for detailed modelling for sectoral alignment with India’s climate commitments.
- Prioritizing overall emissions: Future modelling should prioritize overall emissions decline, not just performance of covered sectors.
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